Age Becoming an Issue With Health Care Benefits, Study Shows

Employers review their coverage options as they note younger workers are opting out of health plans while the number of older employees climbs.

The effect of the health care reform law on employer benefit plans can be found in the data, according to a recent study by Automatic Data Processing Inc., which shows that enrollment rates for older employees is steadily increasing while enrollment for younger ones is declining.

It is shifts like these that will prompt employers to make changes to their benefit plans in an effort to lower health care costs as key provisions of the Affordable Care Act take effect in 2014, says Christopher Ryan, vice president of strategic advisory services for the Roseland, New Jersey-based payroll processing giant. On July 2, U.S. Treasury Department Assistant Secretary Mark Mazur announced in a blog post that the employer mandate has been postponed until 2015.

According to the 2013 ADP Annual Health Benefits Report, which was released in June, 50 percent of eligible employees under age 30 participate in their company's health plan compared with 72 percent for those over 50. Among the reasons cited for low participation among younger workers is a provision in the health care reform law that allows dependents up to age 26 to stay on their parents' health plan. This may also provide "additional motivation for older parents to participate in their employer-sponsored health insurance," according to the report, which cites the growing number of baby boomers working into their later years as a key reason for the higher enrollment figures.

"The ACA is prompting many organizations to re-examine their benefits strategies as they move into 2014, when the major provisions of the law will gointo effect," says Ryan, who co-authored the study. In response, employers will be making changes to their benefit plans to lower costs, like reducing their contributions to dependent coverage or offering health insurance to workers who were not previously eligible in order to reduce the risk in their pool of insured workers, Ryan says.

"These strategies and others could have a far-reaching impact onemployers and employees," he says.

ADP studied enrollment data between 2010 when the health care reform law was passed and 2013 in an effort to collect hard evidence on how reform will change employee benefits.

"A challenge with ACA is that there's been hype and controversy but very little empirical data," Ryan says. "We wanted to provide objective data. Right now we're at the point where rubber meets the road. HR departments will have to figure out how this is going to work."

The study, which ADP plans to release annually, will track eligibility, participation and premium trends before and after the Affordable Care Act is fully in place in order to create a benchmark for changes in 2014, according to the report.

Other key findings include:

Employers increased their contribution share for single coverage health plans and decreased their share for family coverage. In 2013, the largest employer contribution share was for single coverage at 77 percent.

Increases in monthly health insurance premiums have leveled off after a 7.6 percent spike between 2010 and 2011. Premiums rose 3 percent in 2012.

An analysis of 21 states with the largest employee populations shows that health plan costs vary dramatically from state to state. In 2013, New Jersey had the highest monthly premium at $968, and Colorado had the lowest at $733.